IBERSOL | Annual Report 2021

ANNUAL REPORT 2021 - existence of material transactions between the Group and the investee; - exchange of management staff; and - provision of essential technical information. Financial investments in associated companies are recorded using the equity meth- od, being included in the consolidated statement of financial position under the heading “Financial investments in associated companies”. Financial investments in associates are subject to impairment tests whenever there are signs of impairment. An impairment loss is recognized in the income statement by the amount of the excess of the asset’s carrying amount over its recoverable amount. The recoverable amount is the highest of an asset’s fair value less the costs inherent in its sale and its value in use. For carrying out impairment tests, each par- ticipation is analyzed separately. Impairment losses on financial investments in as- sociates are reversible. The entities that qualify as associates are listed in Note 5. 2.4 GOODWILL Goodwill represents the excess of the acquisition cost over the fair value of the iden- tifiable assets and liabilities attributable to the Group at the date of the acquisition or the first consolidation. If the acquisition cost is less than the fair value of the acquired subsidiary’s net assets, the difference is recognized directly in the income statement. The Group performs impairment tests on Goodwill on an annual basis or more fre- quently, if events or changes in circumstances indicate a potential impairment. The recognized amount of Goodwill is compared with the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Whenever the book value of Goodwill exceeds its recoverable value, the impairment is immediately recog- nized as an expense and is not subsequently reversed (note 2.9). 2.5 REPORT BY SEGMENTS The Group presents the operating segments based on the management information produced internally. In accordance with IFRS 8, an operating segment is a component of the Group: (i) that develops business activities fromwhich it can earn revenue and incur expenses; (ii) whose operating results are regularly reviewed by the chief operating decision maker of the Group (“chief operating decision maker”) for the purposes of making decisions on the allocation of resources to the segment and the assessment of its performance; and (iii) for which separate financial information is available. The Group operates in three major segments of activity: 343